3 Rules for Recasting Performance Management so it Actually Works

Annual goals worked 20 years ago. Today, goals are hardly relevant beyond three months. Quarterly feedback was acceptable to Baby Boomers.

Today, Millennials want almost constant feedback.

Performance discussions with your manager worked reasonably well when your work was driven solely from your manager. Today, workers are regularly immersed in multiple cross-enterprise and cross-functional project teams with dotted line reporting, relational context and technology enabled in new collaborative ways.

There is no doubt that the nature of our work and workforce has changed. Therefore, so must our approach to performance management.

We interviewed hundreds of companies and talked to scores more. Our data shows that top performers like Adobe, Microsoft, Motorola and others are out in front with at least three new high-performance approaches to performance management:

  • Future-focused coaching, not past-focused feedback
  • Strengths-oriented development, not weaknesses-oriented evaluation
  • Pay for experience, not for performance

Future-Focused Coaching

Managers are no longer expected to provide feedback on the last 12 months’ performance. They are expected to offer forward-looking, informal, just-in-time coaching. Peer input and coaching is expected and welcomed, too. In response, employees set dynamic goals that are often modified in response to changes in business goals or priorities. They solicit ideas and suggestions from customers, co-workers, and subordinates to improve their performance. They leverage social platforms and mobile devices to collaborate with these stakeholders, and they rely upon technology to enable peer coaching that fuels skill development and moment-of-need knowledge.

Strengths-Oriented Development

The days of employee report cards — highlighting where our employees failed and “fixing” them — are over. A focus on employee strengths is the quickest path to employee engagement and business results. Mobilizing employees into roles and experiences that leverage their unique talents in alignment with business goals is the straight-line path high-performing organizations take to fulfill employee potential. Let’s be honest – you, me and, well, everyone is simply not great at everything. So accepting mediocrity in what employees are average at and further developing their strengths creates the organizational platform for top performance.

Pay For Experience

Compensating by predetermined performance criteria drives corporate chaos. Consider the 2011 Hewlett-Packard conundrum as just one example. HP’S CEO, Leo Apotheker, proved to be the poster child for everything dysfunctional about the pay-for-performance approach in America’s corporate executive suites. During Apotheker’s 11-month tenure at HP, HP shares dropped significantly in value, and turnover rates of key talent during that same 11-month period skyrocketed. Not surprisingly, the HP Board cut Apotheker from his position and on his way out the door he took with him almost $25 million in bonus, stock, and assorted perks.

This situation is better described as “pay for non-performance.” And frankly, the pay-for-(non)performance approach incents executives and other leaders to game the performance measurement system by manipulating performance criteria in their favor.

Healthy enterprises have two antidotes: 1) pay for experience, and 2) decouple remuneration from the performance management system. The most profitable and innovative companies acknowledge unique talents, scarce skills, and hard-to-fill positions by linking pay to these business-aligned requirements. Further, in accordance with neuroscientist David Rock’s research, they take care to de-link compensation and performance, which “removes the power of performance management scare tactics of the past and changes the conversation to one of constant improvement and development.”

An important foundation of the new rules to performance management will be to educate senior leaders and employees alike on the idea that people add business value and make a measurable contribution to business goals at every level when growth of strengths is prioritized via continual coaching, and unique skills and experiences are rewarded. Is your organization making the performance shift for better business results? If not, what’s holding you back?

Watch for our annual Performance Management benchmarking survey releasing soon. It will ask the critical questions to validate – or refute (unlikely but possible) – the new approaches to performance management.

Until next time….

Laci Loew, Vice President, Talent Management Practice and Principal Analyst,
Brandon Hall Group

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